7%. >> worried about tough conditions. nintendo poses a loss in the first quarter, hurt by the strong yen. we have the latest, probably the most important sentiment indicator on the continent. >> one investors put a lot of faith in. >> the ifo business climax 103.3, weaker than expected. we were looking for a figure of 104.7. currt continues index, 111.6. forecast was 113. german expectations index,

103.3. business index weaker. we saw a bounce up on novotny's interview and comments that potentially reasons for thinking giving a banking license. we wonder if this may come down, the ifo institute will come out with comments in a second. let's get reaction. sometimes the ifo doesn't tie in the pmis we got but today they might be. are you in your investment scenario pricing in germany falling back into recession in. >> things are getting tougher. this means we're approaching that crux point where something has to be done. the question is on europe to integrate further or except exits. >> they don't actually are to do that. there are other ideas out which i'm surprised they don't get discussed. there's this redemption fund. there's the discussion we talked about with hugo dix, interest rate subsidies.

i'm surprised they're not getting more air time. >> the differences in the region, it's a monetary union but needs to be a fiscal union as well. that's also -- the guards come out very vocally and said they will revisit the idea of euro bonds but they need to integrate bonds first because they need to share that debt burden to be able to -- share the budget in order to share the burden. >> you have roubini saying watch finland, without any potential downgrades. more importantly, when it realizes what liabilities may be on the hook for, is it the core countries, is it finland, germany that ultimately look -- >> finland may be the first country to -- >> you see that deterioration anyway because the rating agency came out and said the aaa-rated countries, for example, germany, they put outlook to negative. it shows even stronger countries

are ones that will have that burden of support. >> and that's exactly what ifo used euro crisis increasingly burdening the german economy. more reaction on that. plenty more on the hoe. we'll be in barcelona, catalina, looking to be the first to request a state rescue. lg electrics, cell phone business struggles. in uk, second quarter reading of gdp is expected to show economy is still in recession. we'll bring you those numbers in under half an hour. at 11:30 central european time we'll head out to brussels where the eu commissioner overseeing financial services gives a press conference on the future of libor. we'll speak to an israeli venture fund capitalist who says necessity are creating the best tech outside of the u.s. no letup in sight for spain as yields continue to edge

higher. take a look the what's happening across the curb. you can see the two-year just kissing that 7% level. still a bit below it, 6.95%. five and ten-year are vying to be on top. about 7.66%, yield for both of those. they are importantly both above what the 30-year is yielding at 7.64%. investors are increasingly concerned spain may need a bailout as a number of yields are expected to follow valencia's request for state aid perform catalonia's refinancing need is the greatest at 13.5 billion euros, according to reuters. stephen, first to you in madrid, what's the latest take from the federal government as to how it's going to deal with this problem? >> reporter: every day we can see new record in the bond market. we don't know yet how the spanish will perform at london

olympics but for sure every day a new record in the bond market for spain. this morning the yield on the ten-year hit a new record high since the creation of the euro, 7. -- 67% the highest since 1996. also the yield on the two-year hit briefly, 7%, which obviously is unsustainable. once again, yielding speculation about spain needing a bailout, a full bailout in the short term. if no immediate action is taken to ease the pressure from the bond market. spanish finance minister met with german finance minister and issued a joint statement saying first the borrowing costs for spain are not reflecting the economic situation in spain, they're not reflecting the fundamentals of the economy to make it -- it's far too high. second statement, they would push to create banking union in the eurozone as was agreed recently by eurozone leaders.

another spanish minister, minister for european matter, is blaming europe for talking too much and not taking enough action. in a statement it says there is a worry between decisions at european council and their implementation on the ground. >> thanks very much for that. carolyn, you're in spain's biggest region, one of wealthiest, 20% of gdp, i think. does the region at least acknowledge the extent to which it will need backup here to keep its finances in order? >> reporter: so far it hasn't con fired, it will have to tap that newly created 18 billion euro liquidity fund set up by the government. a spokesperson for catalonia government said they're right now studying the possibility of requesting that aid and also they'll be looking at details. most importantly, the strict conditionality attached to any funds from madrid because at

this point what catalonia wants is less government interference, not more government interference because there is increasing rebellion against budget cuts imposed on this region, increasing rebellion against the very tough 1.5% deficit to gdp target imposed by central government. moody's analysts saying there's no way the regions, including catalonia, will actually hit that target. they'll overshoot it by about 1%. i should tell you, there's a very strong voice for independence here in catalonia. they do speak a different language here. the culture is a little different from the rest of spain. there have been calls for a referendum on the region's independence from spain. >> picking up on that point, if they have to get central government funding out of this, does it come with any extension of political controls?

>> reporter: oh yes, definitely. if there is funding from that liquidity fund, it will come with very, very strict conditionality. if the region doesn't adhere to budget deficit targets in a couple months' time, the central government authority will be sending so-called men in black, official auditors, to this region and they will take control of the region and intervene. there was a huge public outcry in this region of catalonia if that were to happen. the president actually said, we're going to hold new elections if that were to happen and it's against the constitution. again, you know, i want to point out, again, this is the wealthiest region in all of spain. as kelly said, accounts for 20% of the gdp. look around you, i mean, tourism is booming. it's the industrial heartland. at the same time it's the region with the highest debt load, 48 billion euros in debt, that's the estimate for 2012. and in the second half of the year, it's facing refinancing needs of almost 6 billion euros. there is growing consensus that

sooner or later catalonia will have to tap this liquidity fund. >> thanks for that. great for you there on the beach. nothing worse than the sil servants from madrid turning up and -- >> did you hear what she said, men in black? it goes back to the point howard davies was making yesterday, federalism in europe reached an apex with the treaty and what's so fascinating this crisis, if anything, has made people feel less passionate about the european project than more so. >> every time there's a new camp, there's always a section that unfurls sort of the barcelona independence state flag. let's move from spain to greece. seems easy to do. greece unlikely to meet the items of its bailout agency. according to reuters, an imf report suggests ecb should take

a haircut to make any potential efforts to lower spanish and italian costs more effective. julia athens. after leading the daily te will he graph, the british government is being briefed that the greek money runs out august 20th. >> reporter: we were talking about that a few weeks ago. that's the fear they will run out of money -- there's been needing for financing in the interim. >> julia, we have big problems with your sound so we're going to just interrupt you a second there. let's bring you back on this. if you're an investor right now, you can see all the stories, i mean, do you want -- what's your

choice? do you want to go into negative yields or do you want -- core bond markets? what do you want to do? >> the debate at the moment, interestingly enough, investors looked at u.s. markets, quite rightly because they were more aggressive and still a growing economy. over the last 12 months returns have been positive. they look at europe and they see losses. there is this question add to whether this has become overstretched and actually the switch, you know, should be validated. from our perspective, we think cheap could get cheaper. that's one of the main risks. during the summer months you'll see that volatility continue on low volume. it is a case that if you look at companies that are global, that have, you know, stronger balance sheets, you know, excellent management and do have this diversified earnings, not just focused on domestic markets within europe, there may be opportunities there, just when we gain clarity. >> we have seen this pick up in volatility, and, ross, no

surprise given investors trying to make sense of the past moving politics. >> or slow moving politics. >> true. julia, i think we sorted out your mike issue. remind us, anybody concurring with this report that greece runs out of money on august 20th? >> reporter: there was certainly suggestion when calculation were being done when i was in greece a few weeks ago they were going to run out of money as early as july. they were obviously given the additional piece at the last bailout tranche, so that tied them over for a bit but there's question about additional financing between now and september. but for now, the troica here, the financing here has huge

question marks on it. boils down to two issues. the slippage and second the debt sustainability. the fiscal slippage, the question mark is, whether the troica can come out and say whether greece has to make adjustment this is year. that will be a problem for the coalition because they promised the people there will be no additional austerity this year. we can't forget the political implications of additional demands here on greece. then over to the debt sustainability. questions about the ongoing involvement of the imf. they need to see debt to gdp down to 120% by 2012. that also raises questions about the next installment tranche, if the imf can be involved. if there cannot be writedowns there will be need for additional financing and additional writedowns. it's where they come from. back to you. >> thanks very much for that. it doesn't help moody's has cut

outlook on eurozone's temporary bailout fund to negative from stable. they say the move follows on from a similar action taken against germany, netherlands and lument u luxembourg, all guarantors of that. meanwhile, in europe you can see dow jones stock behind me, just about weighted to the upside. we saw this morning, they came out and said there were good reasons for discussing debating whether the asm should be given a banking license. that took us up to the session high today. but you have to remember, this follows losses, ftse down 3.7% the last three days. it's down today. dax down up 0.3%. ibex up 1.8% after heavy losses. let's talk about the yield kufshs out of spain, still very

much in focus. the two-year slipping back below the 7% level but we are at all-time highs on the ten-year, 7.63%. flat, between tens and fives. ten-year bund yields have risen, 1.26 italy, 6.5 2shgs yield slightly lower today in italy given the benefit of those novotny comments. keep our eyes on treasury, all-time low. in the uk, gdp coming out in about 15 minutes' time. should be the third successive negative for uk and could be four out of five negative quarters. euro/sterling, we'll get focus out of that. sterling/dollar, 1.55. we did get down to 1.2171 in

previous session on the euro/dollar. let's find out what happened during the asian trading day. tracey joins us out of singapore. hi. >> reporter: asian markets in the red on europe concerns and those lackluster earnings report from the u.s., the region's tech stocks tumbled on disappointing numbers. hong kong marked a third day of losses. property developer cheung kong holding fell. shanghai composite closed off half a percent. and tokyo stocks hit a seven-week low as well, down 1.4% on disappointing trade figures. apple-related stocks also underperformed. similar story in south korea, kospi dropped 1.4%, hurt by

losses in tech sector. lg electronics missed estimate. take a look. dropped more than 2%. elsewhere, cpi maintain second quarter, unlikely to strengthen the case for the rba to cut rates in august. a quick check on sensex, weaker, down 0.4%. >> thank you for that. plenty of earnings out here in focus today. arcolor up 0.4%. peu dpchlt eot is targeting further savings and that's what the stock price may be reflecting. it's getting a lot of political pressure about those job cuts. and daimler today, stock up 3.2%. and better than expected numbers confirming it's fully a target.

deutsche bank says second quarter results will fall short of estimate, countrily down 3.5%. that's where we stand right now. so, the banks under pressure. >> it's remarkable because we saw the weakness in gm and ford shares yesterday in u.s. trading. nevertheless, some automakers here doing better. speaking of earnings, though, facebook reports its first earnings tomorrow after the closing bell after becoming a publicly traded company and that prompts us to ask, where do you think the stock will trade after that report? will it be enough to put mark zuckerberg back on the rich list? shoot us an e-mail at worldwide @cnbc.com and tweet us @cnbcwex or individually. >> we would love to get your comments. still to come, we'll tell you why nintendo is optimistic about the future despite failing to return to profit in the first quarter. .

welcome back to the program. japanese video game maker anyone ten dough posted small than

expected second quarter losses. net loss came in about $220 million, about a third less than losses it posted a year earlier. but for the full business year to next march, nintendo says it's sticking with the forecast for profit rebound and counting on stronger sales from new software titles. you can see the shares there down about 1.6%. joining us, director at mizuho international. what accounts for the negative -- >> sorry, the sound -- >> can you hear us okay? >> hello? >> can you hear us okay? we'll work on the sound and come back in one second. we're going to work on that. in the meantime, lg electronics, speaking of software companies -- at least electronic companies, that is, finished down 2% after the company reported disappointing second quarter profits. we have the details and we go out to seoul for the latest there.

>> reporter: hello. lg electronics operating profit came in at $300 million, up 120% on the year, but off 22% on quarter. the firm reported losses in its mobile unit hurt by tough competition from rivals samsung electronics and apple. lg electronics failed to gain momentum in this phase because of its slow rollout of smartphone models in the beginning of this race. its mobile unit logged in almost $50 million operating loss because of weak sales while marketing expenses jumped. lg electronics is vowing to make a comeback here with a new smartphone set, which it plans to unveil in september. that is before apple releases its latest iphone. back to you. >> thanks for that. let's try to get back out director at mizuho international and can explain to us about the negative stock reaction we're

seeing from nintendo. >> i think the short-term problem is they're not coming with products that really will appeal. w wii was down 54% this quarter, which tells you they need to come up with something like new 3d. that's a short-term problem which our analysts doesn't think it's a problem because they eventually come up with a fairly nice gadget. the bigger problem is related to what you were just reporting. there will be a lot of smartphones, et cetera, these gadgets that will be able to comply with much more higher specifications, and also software which enables these games to be played by personal computer. the hardware console itself is pretty much in question in the long run. they have two basically problems they have to juggle with. >> what does nintendo need to look like in three to five years' time? >> they should be focusing a lot more into software side, definitely, without a speck of doubt. i think they know this as well. it's a big, big ship to turn

around. we will see the progress. in fact, they're doing a very good job in trying to do that with software companies but since they've been relying on the hardware side, it's a big ship to turn around. >> if they don't make that switch, are they going to be left behind on this -- one of these big switches, electric logical sea change that's happening? >> that's very, very true. on top of these negativities in the long run, i think you're seeing a strong yen, and i think the stock market is treating nintendo as if it were -- well, virtually, i'm not trying to put a pun on this, a game stock on foreign exchange rates. that's certainly the case at this moment. you can see this in other earnings as well. for example, cannon, they came up with a very good earnings coming back, clawing back from these earthquakes and these flooding negativities on supply chain side but they had to revise down because of the yen. and worries over sales in europe.

this is something that also applies to nintendo as well. but particularly in europe, the second half is going to look pretty rough. especially for bigger players like canon doog dealing with higher products like copiers and office automation related goods where financial sector in europe is hurt, meaning leasing and rental will be hurt as well. a lot of negativities compounding on these companies. >> thanks for that. we'll see if nintendo can turn losses around. >> technology business, they cracked it with wii, right? created a whole new home entertainment system and now everything is going on apps. >> it can move away from them. after the break, it's the big news release of the morning. british gdp figures. will it confirm third quarter of recession?

these are the headlines from around the world. germany business sentiment falls to low over two years. markets await second quarter gdp numbers out of uk. yield on the spain's two-year bond push above 7% level. the latest evidence shows

very reluctant to lend in the second quarter. talking about second quarter, we're getting the gdp print out of the uk. second quarter gdp, minus 0.7% on the quarter. much weaker. minus 0.3%, biggest fall since first quarter 2009. biggest since first quarter of 2009. >> ros to put that into perspective, a drop of 0.8% year-on-year compared to spain -- spanish economy is down 1% a year. the uk is down almost the same amount. >> two caveats, two big caveats on this number. the first is it's only 45% estimate of the economy so far, right? so there's always big revisions

to come. second is the jubilee holiday and the weather, pointing out, significant impact from jubilee and weather. they haven't made a full assessment of the jubilee impact. gdp, nevertheless, is still 4.5% below. the total output of the whole economy is still 4.5% below the precrisis peak we hit in the first quarter of 2008. still a percent below the third quarter of 2010, which was the quarter after the general election. so, undoubtedly, this does cause big political problems as well for the coalition. sterling, nevertheless, falling down to its session lows, below -- against the dollar. james knightly, uk economist at ing. your reaction here. what are the implications? >> as you said, i mean, a huge number of caveats around this number. also as you said, it's very early estimate, only based on about 40% of the actual final

gdp data we'll be getting. historically this has been revised massively in the past. the average revision has been 0.4 percentage points. it doesn't alter the picture much when you look near the data. >> the bank of england had talked about whether it may consider cutting interest rates again despite the loans in place and expanded qe. do you think they'll do that? any point? >> i don't think they will. looking at the data, we've got employment rising quite nicely. unemployment falling. business service pointing to growth based on bank of england's own survey and the pmi as well. so much noise going on around this gdp release i don't think it will impact on the policy release at all. >> you talk about the unemployment number, how much of that is a temporary boost from the olympics? there's an enormous jump up in employment in the london area. >> the press have talked about

this story. to be honest, he would have thought the construction on the olympics, where the big employment was, came to end a while back. i don't think the olympics had that much of an impact. it's not going to boost employment in the northwest that much, not boosting employment in the midlands but we're seeing employment gains across the uk. >> what is the outlook for inflation? you have commodity prices boosting inflation, also at the same time because of these negative growth figures, companies are reluctant to boost prices because demand is so subdued. where do you see inflation in the shorter term? >> i think there will be a real margin squeeze going on here. corporate pricing power isn't there. we're looking for headline inflations to continue falling. that is probably going to be good news. if employment is falling, unemployment is falling and households are no longer being squeezed so much by inflation rises, then that helps household fundamentals so good news for 2013. >> british finance minister

saying these disappointing figures confirm britain's deep-rooted economic problems but it sound like you don't necessarily agree. >> i don't have that much faith in first release of gdp data. it gets revised so heavily -- >> would you agree -- sorry to interrupt. would you agree britain has deep-rooted economic problems? >> the gdp numbers suggest they are but the business numbers, they suggest they are better and they get vibrant growth and big falls in unemployment. i think there's a credibility issue here. >> how do you square the employment numbers with the gdp numbers? >> i can't, to be honest. it just doesn't make sense. you don't typically get these sort of employment gains when you're in a recession and you don't see unemployment fall quite as aggressively in this recession. you don't get business growth in recession. it's very difficult to square that circle. >> so, you're more likely to disregard even though -- it's the fourth quarter out of five

we've had negative, you're more likely to disregard gdp and believe employment numbers? >> the pmi numbers have been reasonably good. i think it's more consistent with a flat-lining economy rather than a deep-seeded recession the official data suggests. the gdp numbers suggestion the uk is as bad as spain but they don't have 50% youth unemployment and 25% headline unemployment. i think it's a very different fundamental economy going on here. >> james, the conundrum continues. thank you for that. james knightly. finally, james, before i let you go, any response -- any more response from the bank -- we have extended qe. did they come up with anything else in the next three months? >> probably not the next three months. probably suggesting something in november, you might get a bit more qe but we are looking to see how this lending scheme kicks in. >> james, thank you. james knightly, uk economist at ing. let's take a quick look at

how markets are trading. watching all of the action. we're seeing the ftse 100 up 0.1%. dax up 0.5%. cac up 0.7% and ibex coming up 2%. we'll see if there is any shakeout after these figures. the ftse moving down a little bit, just up 0.07% now. >> ten-year bund years have risen since the moody's negative outlook. spain, record low yield in the euro era italy, yield a little low, 6.54%. and gilt coming down post that uk gdp number. >> the two-year gilt, new record number 0.09%. >> they should just get out there and borrow for big -- they should build a new london airport based on bank guarantees

of, you know, lending. we should borrow for infrastructure project -- >> that's what low interest rates would typically tell you. ross, for prime minister. let's take a look at forex euro, strengthening against the dollar. up 0.6%. green arrows across the dollar. aussie dollar moving to the upside against the u.s. dollar, so about 0.4% to the upside there. meanwhile, improved production on china's growth in annual review saying the world's second biggest economy is set for a soft landing as it faces global risk but urging beijing to continue with reforms. they say the chinese currency is now moderately undervalued. meanwhile, strategic management launched a dublin fund, with

exposure to chinese currency, known as rmb. china's safe and stable currency makes it a safe haven alternative. not sure about the name, but i like the idea of the fund. how much interest is there in having exposure to the rmb, why is it such a different -- different data? >> it's an opportunity for investors to diversify their investments because usually they're invested in european currencies, such as euro and other currencies in europe, us dollar, swiss franc, and swedish krona, and a lot of investors are looking for rmb, but the problem -- and that's why this product is innovative, is the problem is that if you want to buy rmb, you must bias sets

denominated in rmb. it's very difficult. >> but is appetite for rmb waning? we know currency is not a one-way bet on aappreciation anymore. >> it's a short-term view. our investors are long-term investors. maybe currently the market is a little bit shaky, but in the past, in the last past years, the rmb was appreciating by 4% -- >> no, but i just wonder if the dynamics aren't shifting to a point at which having gotten a lot of appreciation out of the way. i think the imf downgrade its view to say the currency was only moderately undervalued, something to that effect. we've seen more activity on both sides, not just -- >> there's a need for diversification. in the next years, i think the chinese authorities, as imf says, they will have to make the

segments improve and the chinese yuan, maybe in five years, ten years, will become normal currency, because today we must have variable for contracts in order for them to be involved in this currency. >> all right. global private equity funds have actually come out and said that this new waive of rmb funds wil help them win bids in china. is this something you're seeing? >> yep. i think the market will change and it's only the beginning. let's remember, the swiss franc or yen against dollar, 20 years ago, 30 years ago, it was -- the swiss franc against dollar, it was four. now it's one. so the future is diversification

into new currencies, such as the rmb. >> what do you think about the trading bands? we saw the rmb fall by a percent, the maximum it's allowed since these bans were introduced. do you think knees bans will widen? and what's your time horizon? >> yeah, it with widen a little bit, yeah, yeah. but the product is totally different because we are inresting in u.s. dollar assets. so, it's very interesting for clients because a lot of my clients say, okay, i would like to buy assets to be involved -- to be exposed to rmb, but i must bias sets denominated in rmb. there is no liquidity. the quality is poor. and the market is not existing really. so, we decided instead of launching as all our competitors, rmb-denominated bond fund, we have a global bond fund denominated in dollars with many countries, many ratings,

many sectors. all the assets are 100% u.s. dollar denominated and the client has a choice between the u.s. dollar share class, the normal share class, denominated in dollar, or exposed to the rmb. >> okay. thanks for that. >> eric vanreas. >> sounds better in stereo, doesn't it? have you heard your name in stereo before? sounds good. plenty coming up on the agenda in asia today. new zealand central bank announces latest policy decision. meanwhile, south korea posts second quarter gdp figures. in japan, nissan motor will post april to june earnings results. u.s. treasury secretary timothy geithner didn't communicate with top british regulators about the libor manipulation. geithner, head of the new york fed at the time, will be facing questions about the libor

scandal in front of the house financial services committee at 9:30 a.m. eastern today. still with us is gemma godfrey. just curious, as we sort of look towards regulation, tim geithner, we'll hear from him later today, meanwhile reports about what else the fed might do here to help support the u.s. economy. policymakers, are they broadly helping, supportive right now? >> central bank action is no longer supporting the markets. that's been a bit of a structure that's actually happened quite recently. if we look, what you used to see is stimulus and bank bailouts, et cetera, used to cause yields to actually fall and help the markets and bring that level of stability back. but what we've seen since april is this relationship is actually broken down, especially in europe. >> would fed action make a difference, if fed came out with more decisive action, would the markets have never fought the fed. >> in america i agree the reaction is slightly stronger and the relationship is still

there 37 and what -- >> that would affect everybody, that would ripple globally. >> what investors are looking for, they don't want any more of this operation twist. they want more straight -- >> more qe. i'm not sure that would do anything. >> it's very short term. it's more cosmetic, not tackling structural issues. you're right, it would have an initial elation in markets, but what happens longer term is these problems come to the fore -- >> one of the three -- four options they've laid out. >> all i know is that the cutting interest rate on excess reserves -- >> you hate that. >> i just think the jury is so out on this maneuver in order to support risk. we've seen what the deposit rate cut for the ecb has done, which is basically exacerbated funding conditions not alleviated them. not that it's the most likely outcome, but fitz a main outcome, i'm not encouraged. >> i put my money on a loans for lenning scheme like the bank of england but it's not a market mover.

>> the problem is the lack of funding is driving markets at the moment. until that gets sorted you'll get that volatility there. >> ecb lending survey says banks saw a slump in loaneding and warn demand is expected to drop further and that rules will be tightened to similar rates seen in the last three months. meanwhile, a change of pace last year, andy warhol art made over $320 million in artist, above picasso. this year marks the 25th anniversary of his death with a unique collection. interest has never been higher in the works of a man, the ultimate barometer of the contemporary art market. andy warhol was obsessed by elizabeth taylor. this silver liz was painted by him in 1963. part of an amazing exhibition. what does this picture a long

with the double elvis, represent to the art world? >> these have never been seen before, so this is the first time these two paintings have been exhibited and two paintings from the same year being exhibited together. so, it's quite a coup. >> that's because they were undiscovered until after his death, until 1979? >> yes. they were kept at the andy warhol foundation. the double elvis was actually rolled up in his town house in new york. and they were kept effectively, the julys in the crown. >> the last time we had a warhol picture we thought was sold was eight elvises. these aren't for sale, but can we put a value on them? >> it's really hard. you know, as you said, they're not for sale. obviously, it's about what anybody is prepared to pay on a given day. >> besides these two, which are part of this amazing exhibition, you have other pictures for sales. the shoes, the campbell's soups as well. what is it about these pictures that makes them so collectible?

>> andy warhol epitomizes modern art. he understand about fame, about brand. he turned it o its head. he made the thins that were famous in the time, they almost made him more famous. he worked in series, that allowed him to become accessible to a much, much wider audience. >> also, it's not just andy warhol. mario piqeutte is being exhibited. why are they together? >> marusing wonderful materials clear resin, identified with cloning, hand grenades as hearts, and again worked in series as well, exactly the same as warhol. marrow appeared in one of andy warh warhol's films, "the driver." . he was the driver with liz taylor. >> the two artists together.

last night they had the opening and it was packed. the week of the olympics. there's something about -- >> kylie was there. >> kylie minogue? >> yeah. >> oh. >> she's really into shoes. she loves warhol shoes. that's the thing, he mimics pop art and it's pop artists -- >> by mimicry and make him famous for it. >> they're saying, despite what's going on in the world, for that sort of art there's huge demand and interest. >> people think that's an asset they can invest -- >> better than putting in your fund. >> exactly. supply and demand, that's the point. short supply and excess of demand, prices will rise. >> good old economics. >> yeah, absolutely. i still think it's a little more of the asset price story, too. it's remarkable what we've seen elsewhere. speaking of asset prices as we head to break let's take a look at what's happening across

the gilt curve because we're seeing fresh record lows in the two-year. that's recovered a bit to 0.07%. follows weak figure on the uk economy. we heard james knightly call them into question but nevertheless it appears britain is in recession.

welcome back to the program. well, we have another acronym to toss at you in case you weren't sick enough of them. try ggric on for size, the great global interest rate convergence. if you want to blame someone for that, mohamed el erian of pimco is your man. in a new op-ed on cnbc.com, he talks about the global rate convergence but says negative, near zero percent interest rate isn't enough to spur growth. something self-evident from the market action we've seen in the last couple of sessions. do you agree, another acronym, a sick of them like i am? e-mail us or tweet us @cnbcwex or get in touch with us

individually. just a note out of bank, sold a loan portfolio value near 100 million euro. trying to shed capital. it's going to to active capital. s.a.we talked with mark hurd talked about the company's acquisition plans. >> we don't ever talk about acquisition, so we typically don't talk about it until after we've made them. from a partnership decision, we're looking to extend our partnerships. we're aggressive in mobile partners, systems integration firms, that can help implement and execute solutions. all kinds of partners. >> oracle has announced billions in share buy backs over the last

several months. is there more to come or any plans to raise dividends instead? >> we have a broad authorization for buy back. we'll consider buying back stock per quarter. and we are very big believers in our own stock. >> how does oracle guarantee revenue, especially when it comes to hardware given what's going on in the eurozone? >> if you looked at what happened in the economy, i thought it was interesting. many companies in the tech sector announced okay results the quarter before, but forecasted a weak quarter. and month one of that forecast was really the month of may. the month of may is the last quarter of our fourth quarter. and we announced very strong results. so, hopefully that's an indication of how we're positioned in the market. >> oracle has acquired several social media start ups over the last several months. what are you trying to build

with them? >> that's a great question. for us, we see the world of e-commerce continuing to grow, so there's trillion dollars of e-commerce going around the planet. we also see more of a movement towards commerce done through social media. so, where we see the real opportunity in social media is for our ability to imbed social media capabilities into our applications. we're trying very hard to make our applications mobile-ready. >> all right, mark hurd talking to chery. let's get final thoughts from gemma. we talked about your investment sort of thesis right now. how is the summer going to go? >> well, we're looking at low volumes. volatility will continue. go that is giving us cause for caution is the fact that market misalignment is highlighting the risks. what we've even is while german bond yields are falling, the cds market is going up, shows this

rush to safety is overshadowing the fact that actually risk is rising. >> can you find -- where are you finding yield? >> dividend yield is still very attractive. >> even though expensive, theatericly. >> if you have a longer term -- >> forecasts are being trimmed. >> but at that time, then, that's when we'll be rotating into different sectors. >> are you worried about dividend sustainability? >> that's why we're investing in companies with very strong balance sheets that are cash flow rich. cash flow in korment corporate >> high frequency economics this morning calling german bunds the most dangerous place in the world. >> exactly. >> perhaps your point there, seeing risks rising as yields -- >> to be fair, pimco came out two years ago and said gilts were sitting on a bed of nitroglycerine. >> how often have we heard this. >> just hit fresh record low yields so you never quite -- you know, you might -- they might be

right. >> look at ggbs, i don't know your views on this, if japan is now finally going to hit the skids, but people bet against japan for three decades. >> and those risks do mount up. >> gemma godfrey, thank you for joining us this whole hour. >> we should get gemma to stay longer. >> we should have a physics chat next hour, that would be fun. no time. we'll talk metaphysics. the fed is looking to take more action to boost the u.s. economy. we'll discuss all of that after the break.

welcome back to "worldwide exchange." i'm kelly evans. >> i'm ross west gate. germany's business sentiment falls to the lowest level in over two years as they warn europe's debt crisis is weighing on the german economy. britain's no stranger to the crisis. gdp falls much farther than second, contracting 0.7% on the quarter. increasing fears about spain's ability to avoid a full-blown bailout pushed yields on the country's two-year bond above the 2% level. apple misses forecasts as analysts say consumers are holding out for the next iphone model.

a good morning to our u.s. viewers who may just be tuning in, joining their come patriots around the world. let's take a look at what's happening in market action. u.s. futures are actually, despite the green you see behind me, pointed in the red once you take fair value into account. we have the dow lower by about 10 or 15 points. nasdaq pointed lower by 28. the s&p 500 weaker as well. the nasdaq, of course, is weighed by apple, which accounts for something like 20% of the index, i want to say. take a look at what's been happening overnight if you want a broader sense of where risk is this morning. cnbc ftse global 300 is flat on the morning. a bit of spikes here in trade, but now evening out, 4632 is the level there. ftse 100 has pared gains after a

weak report on gdp suggesting the uk is in recession. although we've heard some doubt cast on those figures. up 0.06% for the ftse. dax up 0.2%. cac 40 up 0.34%. and ibex is rally up to 1.61%, but it was up 2% earlier. >> the difference going on with stocks and bond markets, and the bond markets are a good indication to see if we've relieved stress on spain. we'll show you where we stand with that right now. fallen back from that 6.7 %. the five-year, slightly lower yields. not by an awful lot. five-year, 7.59, inverted between fives and sevens. pretty flat on that. we're pretty much at all-time era highs for spanish yields right now. kelly mentioned what's going on

in the uk. two-year gilt yield hit a fresh record low, 0.049. that uk gdp number contracting minus 0.7% quarter-on-quarter. we were looking for a figure of 0.3%. those variables factors, jubilee holiday, poor weather, and the fact this is the only first estimate only accounts for 40% of the uk. nevertheless, a bit of a shock. the problem is, it doesn't tie in with the rest of the data, particularly the increasing employment picture. would you have inemployment increasing with that depth of recession? that has economists puzzled. two-year german notes currently with still 0.06%. euro/dollar took a spike up and interview with noti interview. we're down earlier.

euro/sterling bouncing off gdp number, still below 0.80. aussie/dollar, still up. sterling also weaker against the dollar post the uk gdp number. that's where we stand as far as european trading. tracey with a wrap from asia and singapore. >> ross, dismal u.s. earnings numbers and never-ening greek debt saga hurt sentiment in the region. widely down. asia's tech stocks tumbled on apple's disappointing numbers. hong kong stocks marked a third straight day of losses. lg electronics fell. property developer cheung kung fell. shanghai composite off 0.5%.

tokyo stocks hit a seven-week low as well, down 1.4% on disappointing trade figures. apple-related stocks also underperformed. >> thank you. let's now get a check of what's on today's agenda in the united states. the usda releases latest food price outlook at 9 a.m. eastern. at 10:00 the june new home sales, and expected to show an increase of 1.6%, an annual pace of 375,000 homes. it's also another busy day for earnings. boeing, bristol-myers, caterpillar, conocophillips, ford, pepsico, delta all report before the bell. after the bell we'll hear from visa and zynga. "the wall street journal" reports officials are impatient with sluggish growth and high unemployment and are becoming more inclined to move unless they see activity picking up.

the question within the fed is how and win. "the journal" says it could be as soon as next week's meeting or more likely in september. options are more purchases of treasuries and securities, a pledge to keep rates low beyond 2014 or lower interest rates on fed's excess reserves. our next guest, patrick o'keefe, director of economic research at ja cohn. how do you think the fed will react and what option would you like to see? >> my view is the fed wouldn't move any any significant way before the election. it like the supreme court likes to stay out of the political argument that begins mid-summer. "the wall street journal" article yesterday suggested there was some impatience. when you read through it and listen to what the chairman said last week in testimony, very clearly the fed recognizes, they're not saying this explicitly, they recognize as most of us do, there are limits to monetary policy and what it can do, especially by itself.

those limits are fast approaching. >> curious as we look ahead to the housing data, some have pointed there and said there's perhaps one bright spot for the u.s. economy. how does that fit in with your world view? >> housing has certainly begun to improve here in the united states. when we look at the data the past couple of months, there have been some fluctuations, but generally prices are improving. they're up four months -- four consecutive months. haven't seen that in a long time. the volume of transactions, while it does a little bit of a stutter step, on an upward trend. so, generally what we see is improvement there, but we have to remember, we're coming off historical lows. and the progress going forward is going to benefit from low interest rates from some modest growth. but we have a long way to go before housing will be making a significant contribution to the overall economy. >> meanwhile, we get the initial estimate of gdp on friday as well, patrick.

what is that likely to tell us? >> looks like the snail is going to slow down. based on the data we've had, the first couple of months of this quarter, the very low rate of growth that we saw in the first quarter is going to slow more to a crawl. i don't think that a stall is in the works right now. there's enough forward momentum in the economy to keep us inching forward. but certainly the external challenges, fiscal challenges, could jeopardize this rather tepid expansion. >> good to have you on. more to come from you. >> well, in his latest op-ed for cnbc.com, pimco boss mohamed el erian says low interest rates aren't enough to spur growth in the economy. ggric, the great global interest rate convergence, and that's on display this morning. what do you think of the piece? comment, of course, online or join the conversation here on

"worldwide exchange." send us an e-mail to worldwi worldwide @cnbc.com or @cnbcwex or individually. still to come, we'll be heading out to athens as reports suggest the british government is being briefed. the country will run out of money on august 20th.

welcome back to the program. greece is unlikely to meet the terms of its bailout program. this according to reuters. troika officials say further debt restructuring would be required. they say the ecb should take another haircut. julia chatterly is back in athens. they must run when they see you land at the airport. this morning, how close is greece, because we're also hearing the country could run out of funds, how close is the greek government to being able to -- not being able to pay its bills? >> reporter: when i was here last time there was always the suggestion that given data we'd seen from finance ministry, they would run out of cash by early august. don't forget, too, on august 20th they had this bond

repayment to the ecb of 3 billion euros. they're certainly going to need interim financing. the european commission have come out and said they're not going to be able to pay the next install many of the bailout deal until early september. this interim period is certainly going to require more cash for the greek government. what we've heard, though, too over the last 24 hours is the financing here, not just over the next month or so, but in items of the debt sustainability just looks way off and something has to be done about that. throws concerns about the ongoing imf involvement to end this bailout deal. what is clear is that greece needs to step up. that was the message we got from the prime minister yesterday. he said that where greece have fallen behind, they need to catch up. that was effectively echoing what the german finance minister said at the weekend, too. there is willing there. the european commission have said the same thing. they do believe the politicians want to get involved. in line with that, what we saw yesterday was the greek government announcing they're planning to close or merge 2 1

state agencies. that should save around 40 million euros. it sounds positive, but if you look at the details of that, the 5,000 or so employees are not going to be laid off. they're going to be moved into other departments. so yet again a reform that looks positive on the outset. when you drill into the details, perhaps, they're not following through. that's what we need to see from the greek government. they need to show willing in order for us to at least try and get involvement from the eurozone leaders for financing. now back to you. >> julia, thanks. a great point there. back to patrick o'keefe, director of economic research from j.a. cohn. these reports the ecb may have to take losses on greek bond holdings, do you agree and is this a necessary step as we turn the lens toward some of big other countries? >> i think it's absolutely necessary. exempting the ecb from the first set of haircuts sent a very

negative signal to the private sector about further investment in any of the sovereigns who are experiencing difficulty. basically what the private sector was being told is, if you put your money in, you're at risk. whether or not the central banks, in this case the central bank of europe, steps in, it's not going to be at risk. therefore, the private sector, step back and said, wait a second, this can't be a lopsided game. if everybody's going to be in, then they're in, otherwise we're not going to play. >> we'll leave it there for the time being. thanks very much. let's do a quick check of your headlines. germany's business sentiment falls to the lowest level in over two years. uk gdp falls much more than expected in the second quarter. the fed is reportedly moving closer to a fresh roun of action. so uh this is my friend k and his, uh, retirement plan.

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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. let's take a look at u.s. futures as we move closer to the start of the u.s. trading day. we have red arrows across the board. interestingly, the nasdaq is leading the decliners. dow jones pointed lower by about 14 points. one or two there for the s&p. and 28 points for the nasdaq, weighed down by weak performance from apple. the 800-pound gorilla, if you

will. oracle just reported strong results last month, continues to be upbeat on global growth despite headwind. >> if you looked at what happened in the economy, i thought it was interesting. many companies in the tech sector announced okay results the quarter before, but forecasted a weak quarter. and month one of that forecast was really the month of may. the month of may is the last quarter of our fourth quarter. and we announced very strong results. so, hopefully that's an indication of how we're poged in the market. >> that is oracle co-ceo mark hurd speaking in an interview with cnbc in seoul. hurd also said oracle intends on hiring more employees to further grow its business. ross? >> and earnings over here as well in focus. actually, stock up 1.6% today. biggest steel maker forecasting tough market conditions, particularly in europe.

peugeot today, stock up 3.8%. making big job cuts today. detailed what some of those are. more importantly, announced 1.5 billion euros in further savings although the retreasuring is politically fraud. daimler, stock up 3.6% today. stuck to forecast, roughly flat underlying profits this year. did beat what were already exceedingly downbeat market expectations for its numbers. nevertheless, stock up. the fall of the day is deutsche bank, down 3.6%, biggest global investment bank to post weak second quarter numbers. the flagging euro and trading activity are hitting earnings. we have more from patricia in frankfurt. >> reporter: what a surprise it was on the downside. yesterday the market closed, they announced second quarter

net profit, 700 million. we'll get the details on the 31st of july. the stock is reacting down about 3.6%, add to that over the last 12 months that stock is down about 40%. it's not looking pretty. we knew some sort of negative news was due out from the sector, but not that negative and such lame excuse as labeled by some analysts looking at, well, the noninterest costs rising substantially. that means costs for employees, compensation, bonuses, especially in the u.s. and uk becoming increasingly expensive because of a weaker euro. that's one part of the story. other part of the story is the ongoing risk of deutsche bank is dragging on, putting pressure on the numbers. they will not even reach % target in 2013. some analysts xhening on the numbers, expect capital increase may be necessary for deutsche

bank. one pnb paribas saying they could need 1 billion to close that capital under basel 3. very big pressure. and because of that paribas cut the price target to 28.7 euros a share. also interesting to see just now we had one of the german banking association actually coming out and demanding to delay the implementation of basel 3 until 2014. why, ross? well, look at the environment. we do know the answer. >> thanks for that, patricia. let's talk about apple as well. are you -- are you waiting? are you waiting for 5 -- >> have i put off my iphone purchase to wait for iphone 5? i don't know if i'll ever have one. i don't care to. but i'm not normal in that sense, and others. are you waiting?

>> i'm -- yeah. i don't know if i'm waiting for 5. i'm waiting. >> apple third quarter profit were up 20% but earnings and revenue missed forecasts, only the second time that's happened in the past 39 quarters. apple sold 26 million iphones, below estimates of 28 million. it was also down from 35 million sold in the previous quarter. company did cite europe's weak economy but ceo tim cook also pointed to consumers speculating, this is what we were just discussing, anticipating the iphone 5, which is expected in october. we did see apple, of course, have a similarly weak earnings period back in the third quarter of last year. also during a transition time. nevertheless, apple shares were down 5% after hours and down a little more than 5% in frankfurt trading this morning. apple's asian suppliers, across the board there, are also suffering. toshiba, down more than 7%. lg almost 5%. and hon hai.

>> i wonder if we can put that into the lexicon, waiting for 5. >> i'm surprised they still use the numbers. with the ipad they dropped the numbers. at what point do they do that with the iphone, you have to wonder? i wonder why they are keeping with the numbers? nintendo meanwhile posted a smaller than expected loss in the june quarter. it was hurt by the strong yen and sluggish console sales, though. nintendo's net loss came in at about $220 million, a third less than the losses posted a year earlier. for the full business year to next march, nintendo says it's sticking to its forecast for a profit rebound, counting on stronger sales from stronger software titles. we're seeing shares down about 1.6%. >> they're waiting for wii 2. i don't know what it's called but second verse of the wii. lg electronics, shares finished down 2% after the company reported a 22% loss in profits. they reported losses in mobile unit, hurt by competition from rival samsung and apple.

but the south korean tech company vowed to make a comeback with the launch of its new smartphone models in september. all these new launches we're waiting for. >> makes you wonder if some of the market activity we've seen, some of the softness lately isn't just down to europe, but also down to earnings. let's see what patrick o'keefe thinks. he's still with us. are earnings responsible for the selloff? has there been weakness beyond what investors were bracing for heading into this earnings season? >> well, i think it's probably the latter, that, in fact, the macro conditions are signaling future earnings are going to be constrained. to some he can tent, we have to wonder how financial market got so far ahead of conditions in the general economy, in the euro and emerging economies, the slowdown that was implicit in the data here in the united states. so, my guess is that the markets now are internalizing and discounting back in the retardation of growth we see

globally and in the major economies most pronounced. >> we'll leave it there. patrick -- >> are you waiting for number five, patrick? i just need to know. >> you know, waiting for number five, no, i just recently got number four, but isn't that -- isn't that a metaphor for the economy generally, we're all waiting for number five in some way? >> yeah. this is my point. this works for everything. number five fiscal cliff. yeah. we're doing it. patrick, stick around. more to come on "worldwide exchange." we'll go to brussels as officials try to clamp down on market manipulation. apple analyst who has a $1,111 rating on -- what, he couldn't make it 1110? >> we'll have to ask him. >

welcome back to "worldwide exchange" this morning. i'm kelly evans. >> i'm ross westgate. here are the headlines from around the world. germany's business sentiment falls to the lowest level in over two years as the ifo institute warns europe's debt crisis is increasingly weighing on the german economy. britain's no stranger to the crisis. gdp falls much more than expected in the second quarter, down 0.7%, pushing to two-week low. answering the call. reports say the fed may be closer to taking new action to

try to spur the sluggish u.s. economy. apple misses wall street forecasts as analysts say consumers are holding out for number five. thanks for joining us this morning. as we get closer to u.s. trading session, let's look at how futures are pointed. we have red across the board behind me, once you take fair value into account, which our colors haven't done. dow jones industrial average is implied to open higher by ten points. s&p 500 is roughly flat, maybe a point lower. the one to watch is the nasdaq. it's down significantly. about 26 points for the index. a drop, if you look at level of 2500, of more than 10%. has a lot to do with weakness we're seeing out of apple, the 800-pound gorilla of that index. we'll take a look at what's

happening across the globe as we hand off to the u.s. green behind me, ftse up by more than 0.1%. cac, 0.6%. and the ibex holding onto a gain. >> we'll see if that lasts. we've had plenty of guests talking about how to make money. here's what some experts told us. >> we like apple from here. the -- because we are a believer in this sort of -- this event actual mutualization in europe. >> sterling has done pretty well. and i think it will continue to do well, like a lot of euro costs, it's got solid fundamentals compared to what else is around. you can argue the other way, but for the moment markets is on the positives.

>> it is a case that if you look at companies that are global, that have, you know, stronger balance sheets, excellent management, and do are this diversified earnings, not just focused on domestic markets within europe, there may be opportunities there. u.s. treasury secretary tim geithner goes before house financial committee at 9:30 a.m. eastern time to answer questions about the libor scandal. "the washington post" reports when geithner ran the new york fed in 2008 he didn't mention in meetings with top regulators that barclays admitted to the fed it was manipulating buy lor. documents released include a phone call transcript from 2008 in which a barclays trader told officials we know we're not posting an honest libor. >> cnbc will have live coverage of secretary geithner's appearance from house financial services committee that starts from 9:30 a.m. eastern. patrick o'keefe is still with us. patrick, how significant is the

libor investigation? do you expect any broad financial ram fictions from these various ongoing settlements? >> i think that the biggest consequence of the libor scandal is that it's yet another indication to the general public that there's something wrong in financial markets, generally, as if they didn't need additional evidence. and i think that erosion of confidence in another set of institutions is significant. with respect to the economic consequences, that's going to be worked out in the courts. it's going to be yet another cloud hanging over the economy's head going forward for a number of years because many financial institutions now face a question mark over whether they have exposure to manipulation of the rate. >> yeah, confidence is certainly eroding. of course, questions about the criminality of these acts will remain. we'll keep an eye on reports. german confidence fell for the third straight month, hitting lowest level in over two

years. the country's ifo institute warned the latest survey results show the european debt crisis is continuing to weigh on german economy. the current conditions index and business expectations index fell last month. meanwhile economic slump in britain continues at a faster pace. the 0.7% contraction, much bigger than the 0.3% forecast. the biggest quarterly drop since 2009. george osborne says deep economic problems have contracted. uk economy is still 4.5% below its total peak output, which we hit just before the 2008 financial crisis. >> it is remarkable given the employment picture hasn't been worse. >> the employment picture is improving. the last set of employment numbers were better by about 60,000. >> you have to hope it

continues. the u.s. and european economies are in the dumps, as we were just discussing. how can countries create growth? our next guests the answer is in innovation, technology, medicine, computer science, all need to leave the way. managing partner at jerusalem venture partners from new york joins us. errol, what are you doing specifically to encourage this innovation? >> well, i have established jvp 18 years ago. i can tell you israel moved from an older economy into the fastest growing knowledge economy. and innovation has really been the word, as you say. in the '90s we were building the technology infrastructure for the world with defense technologies moving to something like optics and wireless and large software systems. but today a lot of what we're focusing on is the consumer, as he or she is called, but it's really the individual.

and here we need applications. we need to add to the engineers, artists and writers and advertisers and a lot of additional disciplines. and innovation today in israel is really leading the economy to be much stronger than many other places. >> that may be the case, but japan is also an extremely innovative country. certainly has been leading the way with regards to new technologies over the years. and that still isn't the swing factor. that still isn't enough. why should we think that, you know, that this is going to be the way out for om of these economies plagued by much bigger problems? >> well, you know, the younger people are trying to tell people in japan or in europe, they're trying to tell their leaders not only to solve their fiscal problems, but they're trying to tell them, we have ideas, we have innovation, support us. one of our latest companies, click tech, which we started with -- you know, it started in sweden with israeli support and american support, and it's now an american, swedish, european,

international company. it has shown the growth in a big way, revolutionized the way business intelligence is being done today across the world. so, it's not only about the core technology. it's also about the willingness of the individuals and the government to support people daring and starting a company in a place where failure needs to be understood. sometimes you need to start and see how it goes. we are a country of immigrants. immigrants always have nothing to lose but only to gain. >> patrick, do you have a question? >> yes. the benefits of technology and it's moving the global economy, the advanced economies forward, cannot be disputed, but do you fear a sort of ludite reaction because of secular declines we've been seeing around the world, particularly in the advanced economies? >> i think that even the world of technology needs to move to

the next phase. people are focusing on core technologies, but today it's moving from a technology revolution to a cultural revolution. it you look at what facebook did or what some of the other companies are doing, if you look at one of our companies that is working with lion's gate to take a computer -- to take a film and to turn it into a social computer game, hunger games, you see you need to bring new concepts to what was thought about as technology. technology today needs to not only be in industrial zones, it needs to come into the city and bring them back to life. it needs to bring energy into many of the places that are feeling their energy has moved elsewhere. and i think that if the leaders understand that, if they connect to the younger people, if they give the incentives, if they understand that options, stock options, need capital gain tax rates and not income tax rates, if they give them the chance, they will see that they will come up with some of the best

ideas that investors should be supporting. >> what are the -- at the end of the day, investors support these people, will still be looking to realize their investments at some point. so, what's it like exiting investments you may have made early other? >> i can tell you it's not easy to take a company public right now. but we had companies like hormadus we were fortunate to sell for $4.8 billion, or last year click, as i was talking about, $2 billion where we invested just a few million to create it. two months ago we sold to emc, extreme io in the storage space, a company 2 1/2 years old and sold for $30 million. when you have big concepts, big ideas, when the world of education needs to change, when the world of media is moving from broadcasting to interactive, innovators around the world have things to do. governments need to listen. the younger people have ideas.

europeans have ideas. israel is coming to new york and to hollywood and to other places to marry the excellence on the creative side with the technology and to bring this message to the younger generation because that's where a lot of the innovation and growth is going to occur in the next few years. i'm gladys ral is focused on it. >> okay. joining us from jerusalem venture partners out of new york for us this morning. thanks very much on all that. major capitalism is such a tricky industry. we want to bring you live pictures from brussels where eu financial services commissioner barnier is unveiling new proposals on market abuse and it's some pretty serious stuff. the new measures could make manipulation benchmarks like libor a criminal offense. we're just now getting word that the eu has proposed criminal penalties for libor manipulation that could or should, rather,

include prison. this according to eu's barnier. we head out to spain in a few moment's time where yield remains stubborn. more to come on this morning's "worldwide exchange." 

you are watching "worldwide exchange." if you're just joining us, he's thoo he are your headlines. germany's business sentiment falls to the lowest level in over two years. >> uk gdp falls much more than expected in the second quarter. the fed reportedly moving to a fresh round of action. there's no let upin sight for spain as yields continue to edge higher there. we're keeping an eye on a shorter end of that curve where the two-year did hit 7% earlier before backing off. backing off now quite a bit at 6.82%, the latest. five and ten-year vying, 7.55% for both of those. the 30-year edging a bit back up in terms of the yield, 7.58%. investors are increasingly concerned spain may need a sovereign bailout as a number of autonomous regions are expected to follow valencia's request for

state aid. catalonia's refinancing need is the greatest this year at 13.5 billion euros, according to reuters data. carolyn is following the story in barcelona. >> reporter: yesterday a spokesperson for the catalonia government said they're right now studying the possibility of requesting that aid but also they'll be looking at details. most importantly, the strict conditionality attached to any funds from madrid because at this point, i need to tell you that what catalonia wants is less government interference, not more government interference, because there is increasing rebellion against the budget cuts imposed on this region, increasing rebellion against the very tough 1.5% deficit to gdp target, which has been opposed by the central government. and moody's analysts saying there's no way the regions, including catalonia, will actually hit that target. they will overshoot it by about 1%. i should also tell you there is very strong voice for

independence here in catalonia. keep in mind, they do spoke a different language. the culture is a little different from the rest of spain. there have even been calls for a referendum on the region's independence from spain. >> picking up on that point, if they have to get central government funning out of this, does it come with extension of political controls? >> reporter: oh, yes, definitely. again, if there is funding from that liquidity fund, it will come with very, very strict conditionality. in fact, if the region doesn't adhere to the budget deficit targets, in a couple months' time the central government authority will be sending so-called men in black, official auditors, to this region, and they will take control of the region and intervene. there was a huge public outcry here in this region in catalonia if that were to happen. the president actually said, look, we'll hold new ee electrics if that were to happen and it's against the

constitution. again, i want to point out again, this is the wealthiest region in all of spain. as kelly said, it accounts for some 20% of the gdp. look around you, i mean, tourism is booming. it's the industrial heartland, but at the same time, it's also the region with the highest debt load. 48 billion euros in debt. that's the estimate for 2012. and in the second half of the year, it's facing refinancing needs of almost 6 billion euros. so, there is growing consensus that sooner or later catalonia will have to tap this liquidity fund. >> obviously, that was part of an interview we had a little earlier. let's get over to stephen in madrid. the big question is, now they have to add in the cost of the regions to their funning needs. how much more money do they need to raise this year? and how likely is it they're going to get that? >> reporter: not only spain has

to cope with restructuring of banking sector, now has to deal with the autonomous region. the government set aside 18 billion to republic the region but perhaps it's not enough. there's speculation it could cost a lot of money. investors are now worried more about this region story than really listening to what spanish finance minister said yesterday after his meeting, saying borrowing costs in spain while not reflecting fundamentals of its economy. today the pressure is not easing on the bond markets. this morning we had a series of new record risk premiums for spain was close to 650 basis point, 649 exactly. yield on spanish ten-year was at the highest level since 1997. obviously, the highest level since the creation of the euro at 7.67%. for the first time today we had the yield on the spanish

two-year above 7% for a short time. again, this is raising the question of a bailout of the spanish economy. >> thank you for that. and still to come on the program this morning, apple misses wall street estimates in the third quarter, but our next guest reiterates his price target at over $1,000. fine out why. [ male announcer ] drive a car filled with as much advanced technology as the world around it. with the available lexus enform app suite, you can use opentable to make restaurant reservations. during the golden opportunity sales event, get great values on some of our newest models. this irsuit of perfection.

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convergence. that initialism had some of you stuttering. jim tweeted in to say, ggric sounds like a near unpronounceable form of strangulation. another viewer says, ggric should stand for good grief i'm really confused. we understand. what do you think it should stand for? let us know. if you want to read mohamed el erian's piece you can head over to cnbc.com. join the conversation here by e-mailing us at worldwi worldwide @cnbc.com or reach us. european stock as head of the u.s. open, getting up to the best levels of the day. slim gains for ftse 100. better for the dac and cac. spain around 2%. how does that feed into the futures right now? this is where we stand. we are indicated pretty glad for the s&p 500. we're flat for nasdaq and pretty much on fair value as well for the dow.

a cautious start indicated by the futures at the moment. meanwhile, apple's third quarter profit rose 30% but earnings and revenues missed analysts forecast, first time that's happened in 39 quarters. they sold 36 million iphones, not the expected 38 million. the company cited week european economy and tim cook also said customers are anticipating iphone 5. apple down 5.6% in frankfurt. apple's asian suppliers were also a little weaker, apart from the last one. hon hai down 4.3%. joining us is brian white. thanks for joining us. what's your excuse then?

>> well-being i think when you look at what apple sees. number one, they're not immune to a slowing world. they highlighted europe, highlighted natural resource countries such as australia, and they also discussed, you know, speculation around new products, especially around the iphone in the fall. i think if you look back last october, we also saw one of these black swan events. at that time it was analysts had not had a fall iphone launch and didn't really understand, i think, how to model it. it had always been a june/july launch. i think this time around you just have a lot of speculation around the new iphone. and you definitely have a weakening global economy, especially in europe. i think those were the two factors. the downside was driven by iphone in the quarter. >> you take the view that if we've got weakness in the stock, you think this is a great buying opportunity. what's your target on stock, 1111? >> target of 1111, based on 19

times our earning number for calendar '13. i think it's a fantastic buying opportunity. i think there was a lot of concern about iphone going into the number. and the feedback i got is, look, if this thing sells off, i would like to be a buyer the next day. i think that's what investors will get this morning. >> we're talking about almost a doubling from current prices. that seems quite aggressive. >> if you look at apple, it's trading at about nine times excash, so they have $117 billion in cash. grown 86% a year over the last seven years. i think this mobile internet ramp we're involved in here is still very, very early stages, right? apple has about 8% to 9% market share in mobile phones and only about 5% in pc and tablets. ipad went through our numbers at $17 million. that's still an emerging category and i think they'll expand that with a mini ipad on the horizon. mobile internet early stages, and this is the way to play it,

apple. >> brian white, sticking by his price target on apple, $1111, senior i.t. hardware analyst at topeka capital. we'll give you a quk look at what's on the agenda in the u.s. usd a. food price outlook, home sales, earnings, including ford, pepsico, before the bell. visa and zynga after the bell. let's get back out to patrick o'keefe. >> what's the most important thing for you right now in ten seconds? >> we're waiting for five. that's the new replacement for waiting for gado, ross. >> i love it. >> you just made ross so happy. thank you for your time and thoughts this morning. >> he's welcome any day. waiting for five. coming up next, we're waiting for five on "squawk" after "worldwide exchange." >> we'll see you back here tomorrow.

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good morning. apple's quarterly results missing the street's mark in a big way. investors are taking a bite out of the stock. euro fears. worries about spain needing a full bailout are intensifying. moody's slashing its outlook on the eu bailout fund. plus, polling the american people. a new nbc news/wall street journal survey finds president obama is still leading mitt romney despite economic pessimism. we'll talk about it. it's wednesday, july 26, 2012 and "squawk" begins right now. good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with